AML-KYC-Final_ver2

7/31/2019 AML-KYC-Final_ver2

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ANTI MONEY LAUNDERING

KNOW YOUR CUSTOMERS

Presented by,

0155 - Gayatri Sharma

0161 - Kanchan Suchak

0328 - Shalaka Deshpande

0309 - Yogita Rajput0367 - Neha Jadhav

9333 - Sakshi Parihar


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MONEY LAUNDERINGCriminal Activities

Drugs

Arm Trafficking

Flesh TradeExtortion

Illegally Obtained

money

Converted to legal

money originating from

legitimate source


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Section 3 of the Prevention of Money Laundering

Act, 2002 defines offence of money laundering as

under:

Whosoever directly or indirectly attempts to indulgeor knowingly assists or knowingly is a party or is

actually involved in any process or activity connected

with the proceeds of crime and projecting it as

untainted property shall be guilty of offence of money

laundering."

MONEY LAUNDERING


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PROCESS OF MONEY

LAUNDERING

2)LayeringDisguise the

origins of

those

proceeds


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Consequences of Money Laundering

Undermining financial system

Expanding crime

Criminalizing the society

Reducing Revenue and control


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TYPOLOGIES OR TECHNIQUES

EMPLOYED

Using fictitious names or operating on behalf of

others

Using shell or front companies

False and Illegal documentation

Using representative offices of foreign banks

Electronic transfers


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PMLA - Objective

To combat money laundering

To impose obligations on banking companies,

financial institutes to:

Verify identity of clients

Maintain records

Furnish information to FIU-IND


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Punishment of money laundering

Whoever commits the offence of money laundering

shall be punishable with rigorous imprisonment of a

term which shall not be less than three years but which

may extend to seven years (for some crimes 10 years)and shall also be liable to fine which may extend to five

lakh rupees.


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Obligations

For institutes

1. Maintain a record

2. Furnish information to the director

3. Verify and maintain records of clients

Records from last 10 years

Power of director to impose fine

1. Checking records

2. Imposing fine

3. Furnish information to institute

No civil proceedings for some cases.


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FINANCING OF

TERRORISM International Convention for Suppression of the Financing of

Terrorism states that financing of terrorism refers to:

1. Any conduct by any person that directly or indirectly, whether lawfully

or unlawfully and willfully provide or collect funds with the intention

that they should be used, or in the knowledge that they should be used, tocarry out an act that constitutes an offence under any one of the thirteen

United Nations Conventions.

2. It also relates to any act intended to cause death or serious bodily injury

to a civilian, or to any other person not actively involved in a situation of

armed conflict, when the purpose of such act is to intimidate apopulation, or to compel a government or an international organization to

either do or abstain from doing a specific act. Moreover it also includes

the act of attempting to participate, organize, contribute or directing the

provision or collections of such funds.

3. It is not necessary that the funds are actually used to commit an offence.


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FINANCING OF TERRORISM

FATF/GAFI- the 9 basic guidelines:

1. Criminalization of acts of financing terrorism

2. Effective sanctions for legal persons for the acts of financing terrorism

3. Freezing and Confiscating terrorist assets

4. Obligations of suspicious transactions reporting involving terrorist acts

or organizations

5. International cooperation for investigations, inquiries, and proceedings

related to the financing of terrorism

6. Other important preventive and detective measures7. Control of alternative remittance

8. Control of wire transfers

9. Control of non-profit organizations

10. Control of cash couriers


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LEGAL SOURCES OF

TERRORIST FINANCING

1. Collection of Membership dues

2. Sale of publications

3. Cultural or social events

4. Door to Door solicitation within community

5. Appeal to wealthy members of community

6. Donation of a portion of personal savings


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ILLEGAL SOURCES OF

TERRORIST FINANCING

1. Kidnap and extortion

2. Smuggling

3. Fraud including credit card fraud4. Misuse of non-profit organizations and charities

fraud

5. Thefts and robbery

6. Drug trafficking

INDIAS PROGRESS ON ANTI MONEY


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INDIAS PROGRESS ON ANTI MONEY

LAUNDERING AND COMBATING THE

FINANCING OF TERRORISM (AML/CFT)

India became FATFs 34th Member in June 2010.

India also gave an Action Plan in June 2010 and followed up with ActionTaken Report in October 2010 and in February 2011.

The 2nd review of Indias Action Taken Report was discussed by the FATFPlenary on 23rd February in Paris. The FATF Plenary appreciated the

strong commitment demonstrated by India to the international drive againstmoney laundering and financing of terrorism.

During the meeting, India reiterated its commitments to adopt, enforce andcontribute to international best practices in AML and CFT. India alsohighlighted the implementation of the 2010-11 budget announcementrelating to the establishment of a Financial Stability and DevelopmentCouncil that would interalia review the effective implementation of Indiasmultilateral commitments including FATF priorities.

The Union Finance Minister, Shri. Pranab Mukherjee, approved Indiataking over as the co-chair of the Asia Pacific Regional Review Group ofthe FATF. It is one of the four FATF International Co-operation ReviewGroups. The others are: Europe/Eurasia, Americas, Middle East / Africa.


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KNOW YOUR CUSTOMER

For the purpose of KYC, a customer is defined as:

a person or entity that maintains an account and/or has a

business relationship with the bank.

One on whose behalf the account is maintained (i.e., thebeneficial owner)

Beneficiaries of transactions conducted by professional

intermediaries, such as Stock Brokers, Chartered Accountants,

Solicitors etc., as permitted under the law, and

Any person or entity connected with a financial transaction

which can pose significant reputational or other risks to the

bank, say, a wire transfer or issue of a high value demand draft

as a single transaction.


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WHAT KYC MEANS?

Making reasonable efforts to determine the true

identity and beneficial ownership of accounts;

Sources of funds

Nature of customers business

What constitutes reasonable account activity?

Who your customers customer are?


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KYC DOES NOT MEAN

Denial of Service to the Common Person

Intrusive Behaviour

Use of information for cross selling

Harassment of customers- threatening to close down

the accounts arbitrarily


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KNOW YOUR CUSTOMER Four key elements are the basis:

1. Customer Acceptance Policy

2. Customer Identification procedures

3. Monitoring of transactions

4. Risk Management


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CUSTOMER ACCEPTANCE

No account is opened in anonymous or fictitious/

benami name(s) and

Customers are categorised based on risk perceptions

in terms of the nature of business activity, location of

customer and his clients, mode of payments, volume

of turnover, social and financial status, etc.

A Customer Profile (in the prescribed format)

The customer profile shall be updated, on a periodical

basis, as under:

1. For low risk customers Once in three years

2. For medium risk customers Every year

3. For high risk customers Every year


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CUSTOMER IDENTIFICATION Customer identification means identifying the customer and

verifying his/her/its identity by using reliable, independent

source documents, data or information.

Customer Identification is carried out at different stages i.e.,

while establishing a banking relationship, carrying out a

financial transaction or when the branch has a doubt about the

authenticity/veracity or the adequacy of the previously

obtained customer identification data.

The process of verifying a customer's identity and his/hercredentials is not a faultfinding exercise but to create a better

customer relationship that may safeguard the mutual interests

of the Bank as well as the customer.


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General KYC Guidelines Information collected from the customers to be kept

confidential.

Not to indulge into cross selling

Information sought should be relevant to perceived risk Any remittance of funds by way of demand draft,

mail/telegraphic transfer or any other mode and issue of

travellers cheques for value of Rupees fifty thousand and

above is effected by debit to the customers account or against

cheques and not against cash payment.

Provisions of Foreign Contribution (Regulation) Act, 1976 as

amended from time to time, wherever applicable, are strictly

adhered to.


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COMPLIANCE FOR DIFFERENT

TYPES OF ACCOUNTS

Account for Individual

Features Documents

Legal names and any other names used (i) Passport (ii) PAN card (iii) Voters

Identity Card (iv) Driving licence(v)

Identity card (subject to the bankssatisfaction) (vi) Letter from a recognized

public authority or public servant verifying

the identity and residence of the customer to

the satisfaction of bank

Correct Permanent Address (i) Telephone bill (ii) Bank accountstatement (iii) Letter from any recognized

public authority(iv) Electricity bill (v)

Ration card(vi) Letter from employer

(subject to satisfaction of the bank)(any one

document which provides customer

information to the satisfaction of the bankwill suffice)


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Trust/Nominee or Fiduciary Accounts

FEATURES DOCUMENTS

Names of trustees, settlers, beneficiaries

and signatories

(i) Certificate of registration, if registered

(ii) Power of Attorney granted to transactbusiness on its behalf (iii) Any officially

valid document to identify the trustees,

settlors, beneficiaries and those holding

Power of Attorney, founders/managers/

directors and their addresses(iv)

Resolution of the managing body of thefoundation/association(v) Telephone bill

Names and addresses of the founder, the

managers/directors and the beneficiaries

Telephone/fax numbers


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Accounts of Companies and FirmsFEATURES DOCUMENTS

Name of the company (i) Certificate of incorporation and

Memorandum & Articles of Association

(ii) Resolution of the Board of Directors to

open an account and identification of

those who have authority to operate the

account (iii) Power of Attorney granted to

its managers, officers or employees to

transact business on its behalf (iv) Copy ofPAN allotment letter (v) Copy of the

telephone bill

Principal place of business Mailing address of the company

Telephone/Fax Number


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Accounts of Partnership Firms

FEATURES DOCUMENTS

Legal name (i) Registration certificate, if registered(ii)

Partnership deed (iii) Power of Attorneygranted to a partner or an employee of the

firm to transact business on its behalf (iv)

Any officially valid document identifying

the partners and the persons holding the

Power of Attorney and their addresses (v)

Telephone bill in the name offirm/partners

Address

Names of all partners and their

addresses

Telephone numbers of the firm and

partners


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Accounts of non-face-to-face

customers

Usual CIP

Certification of all the documents presented

Banks may also require the first payment to be

effected through the customer's account with anotherbank which, in turn, adheres to similar KYC

standards.

Cross border customersthird party certification/introduction.


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Small Accounts

Account balance not exceeding Rs. 50,000/- and total

credit in all accounts not exceeding Rs. 1,00,000/-

Introduction from another accountholder

Any other evidence as to the identity and address ofthe customer to the satisfaction of the bank.

Job card issued by NREGA signed by an officer of

the State Government or the letters issued by theUnique Identification Authority of India containing

details of name, address and Aadhaar number.


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Records to be maintained under

PMLA by NBFCs, Co-op & RRBs

All cash transactions (or series thereof) of value of

more than Rs. 10 Lakh in INR or foreign currency

Wherein forged currency was used

Suspicious transactions-

Deposits and credits by third party cheques, travelers

cheques, pay orders, demand drafts, etc.

Transfer from one account to another within samebank including N/Vostro accounts.


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Cr or Dr. from non monetary a/c

Money transfer or remittances in favor of own/non-

clients within India or from abroad

Loans, advances, contingent liability by way ofsubscription to CP, CD, debentures, etc.

LC, BG, Foreign exchange contracts, derivative

contracts, etc.


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Procedure

For Maintaining Information:

In hard and soft copies as specified by SEBI or RBI.

Contain details of:

Nature of transaction

Amount

Currency

Date

Parties to the contract


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For Furnishing Information:

Every month to director by seventh day of succeeding

month by the Principal Officer

Maintenance of records of identity of clients:

Ten years from date of cessation of transactions.

Obli ti f NBFC C & RRB


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Reporting to Financial Intelligence Unit-India

NBFCs are advised to adopt the format prescribed for banks with suitable

modifications.

CTR for each month should be submitted to FIU-IND by 15th of the succeeding

month.(While filing CTR, individual transactions below Rs 50,000 may not beincluded)

STR should be furnished within 7 days of arriving at a conclusion that any trans.,

whether cash or non-cash, or a series of trans. integrally connected are of suspicious

nature.

The Principal Officer will be responsible for timely submission of CTR and STR toFIU-IND and utmost confidentiality should be maintained in filing of same.

It should be ensured that the reports for all the branches are filed in one mode i.e.

electronic or manual

Obligation of NBFC, Co-op & RRBs

under PMLA, 2000


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THANK YOU